Is making artistic music a profitable move?

Unusual IPO: Spotify takes off in New York!

Spotify raises fresh money on the New York Stock Exchange to expand.

Despite the skepticism of many experts, Spotify successfully launched on the New York Stock Exchange. On the first evening, the rate was US $ 165.90. This put the Spotify shares about 25 percent above their reference price of 132 US dollars (about 106 euros). The Swedish music streaming provider is worth almost $ 30 billion in one fell swoop! This is good news for Spotify boss Daniel Ek - because he is a man with a mission. In his own words, it sounds like this: "Unlocking the potential of human creativity by giving millions of artists the opportunity to live from their art and billions of fans the opportunity to enjoy and be inspired". Is his plan working now?

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Stock market: Spotify emulates other tech companies

Spotify's IPO is the fifth largest by a technology company ever. Only Alibaba (Chinese online mail order company), Facebook, Snapchat and Google achieved a higher market value at the start of their shares. The result is all the more impressive since Spotify has opted for a direct placement. In contrast to a classic IPO, no new shares are issued, but the existing papers are listed on the stock exchange. Shareholders are free to hold or sell their Spotify shares. It remains to be seen whether this is a clever move in the long term. Currently (April 6, 2018) the share value is around 146 US dollars (about 119 euros).

Spotify: Music streaming market leader in the red

Spotify is the clear market leader in music streaming, but far from a profitable business model. At the end of 2017, the Swedish company had 159 million users, including 71 million paying subscribers. But despite rapid growth - sales climbed almost 39 percent last year - the operating loss rose from $ 349 million to $ 378 million. In 2018, Spotify wants to break the 200 million user mark, but expects an operational minus of 230 to 330 million dollars.

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Netflix insider McCarthy is supposed to help Spotify

To convince investors before going public, Spotify liked to compare itself to the market leader in video streaming Netflix. In addition, company boss Ek has brought on board Barry McCarthy, the man who brought Netflix to the stock exchange as early as 2002. There are certainly parallels: Netflix was in the red for a long time before the company made a profit. Today it is the epitome of a new television culture that does without traditional cable providers - and is worth over 130 billion dollars (about 106 billion euros) on the stock market. For comparison: Analysts trust Spotify to have a valuation of around 20 billion dollars (about 16 billion euros).

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Spotify: Success without your own content?

Netflix now has a lot of series and films produced exclusively for itself - and with its own streaming content has built itself into the feared opponent of entertainment giants such as Disney and Time Warner. Spotify, on the other hand, is dependent on the big labels Sony Music, Warner and Universal Music. Ek is said to have succeeded in knocking out somewhat lower license fees for the Spotify catalog, which comprises around 35 million songs. But his negotiating position is weak in view of the concentrated market power of the other side. And unlike Netflix, Spotify apparently has no plans to compete with the record companies with their own music.

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If all else fails, subscription fees will rise

CFO McCarthy recently made it clear in a presentation that he wanted to achieve higher profit margins primarily by developing other sources of revenue. This includes advertising contracts with promoters or the sale of data to musicians, record companies and concert organizers. So far, Spotify has generated 90 percent of its revenues with paid premium subscriptions. Ek vies for investor money with big promises: "We are only in the second round of this game," the 35-year-old recently told investors. “The possibilities that lie ahead of us are much, much greater than you think.” Should these planned business models not work, Spotify will probably go to the wallets of its subscribers and raise the fees. (With material from the dpa.)